Do Australian Finance Group have a technology strategy, or are they developing one?
“The technology landscape and what our brokers tell us their customers now require has vastly changed since the onset of the pandemic,” David Bailey, AFG CEO, said in canned quotes for the release of the 2022 full-year financials for AFG.
“Together with the acquisition of leading fintech businesses BrokerEngine and Fintelligence we have taken the opportunity to refocus our technology strategy to utilise the best of the three broker technology platforms to deliver a more flexible and efficient solution for our brokers,” Bailey said on Friday.
The outcome is a A$6.3 million (after tax) partial impairment of past capitalised expenditure relating to elements of the new platform developed prior to the acquisitions.
The company also confirmed the impairment of $15 million from Volt Bank’s recently announced return of its banking licence, bringing total impairments in FY2022 to approximately $21.3 million (after tax).
AFG has more than 3700 mortgage brokers and 1650 – or not yet half – are subscribers to a piece of recently acquired kit called BrokerEngine, a new or overlaid division of the business. David Bailey must have name-dropped it 50 times on the investor conference call on Friday morning.
There is some jiggery pokery going on in the AFG financials, a function by and large of rising interest rates.
Trail book commission income projections at all mortgage aggregators is rising fast. In AFG’s case, total commission revenue soared to $730 million from $586 million last year.
A chunky impairment charge of $24 million, up from nothing, soaked up some of this gain.
In a more marked hike in costs than even at Resimac, total remaining costs roared 40 per cent to $72 million last year.
This year’s generous dividend is costing the company $45 million, and you have to ask whether they can really afford it?
An 80 per cent dividend payout ratio is torture - torture when it’s torn away and torture to restore.
Either way, given the pandemonium ahead, I’d be expecting a mass casualty event in mortgage broking and mortgage aggregation, and via its 2022 dividend policy AFG is framing itself with risks it doesn’t need.